Polyester Staple Fibre (PSF) manufacturers can't utilize their production capacity at optimum level due to cheap prices, large cotton crop of last season and import of polyester staple fibers (PSF).
PSF manufacturers' capacity utilization has decreased to 70 percent because of carry over cotton inventories and dumping of PSF by far Eastern countries.
Lower capacity utilization has deteriorated PSF manufacturers' earnings during the nine months of FY06.
For July-March 2005-06, average PSF margins were Rs24 per kg reporting 44 percent growth compared to same period last year. This growth was mainly due to removal of sales tax which helped in improving margins of companies.
However, cumulative gross profits of the fibre manufacturers showed a mere three percent improvement due to lower production and sales compared with last year.
Analyst said that water shortage during Kharif season may adversely affect cotton production and will improve PSF consumption in financial year 2006-07.
On the other hand, reduction of anti-dumping duties on bed linen by EU would also boost import of PSF.
According to analyst, FY 2006-07 was history's second highest cotton producing year with almost 12.5 million bales produced during the year while financial year 2005 was the record-breaking year with over 14.5 million bales.
marketing@alchempro.com
